Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,070,000 in annual sales, with costs of $767,000. The project requires an initial investment in net working capital of $290,000, and the fixed asset will have a market value of $265,000 at the end of the project.

If the tax rate is 34 percent, what is the project’s year 1 net cash flow? Year 2? Year 3? (Use MACRS) (Enter your answers in dollars, not millions of dollars, i.e. 1,234,567. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Years Cash Flow

Year 0 $

Year 1 $

Year 2 $

Year 3 $

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If the required return is 13 percent, what is the project's NPV? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

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Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $0.53 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $3.80 and lasts for 12,000 hours. A kilowatt hour of electricity costs $0.129, which is about the national average. A kilowatt-hour is 1,000 watts for 1 hour. However, electricity costs actually vary quite a bit depending on location and user type. An industrial user in West Virginia might pay $0.04 per kilowatt-hour whereas a residential user in Hawaii might pay $0.25.

You require a return of 9 percent and use a light fixture 500 hours per year. What is the break-even cost per kilowatt-hour? (Do not round intermediate calculations and round your final answer to 6 decimal places. (e.g., 32.161616))

Break-even cost ?

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Your company has been approached to bid on a contract to sell 3,500 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3.1 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $88,000 to be returned at the end of the project, and the equipment can be sold for $268,000 at the end of production. Fixed costs are $633,000 per year, and variable costs are $148 per unit. In addition to the contract, you feel your company can sell 8,800, 9,700, 11,800, and 9,100 additional units to companies in other countries over the next four years, respectively, at a price of $275. This price is fixed. The tax rate is 35 percent, and the required return is 9 percent. Additionally, the president of the company will undertake the project only if it has an NPV of $100,000. What bid price should you set for the contract? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Bid price $

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